Maine tax amnesty collects $8.5 million

AUGUSTA, Maine — Mainers who owe back taxes are taking advantage of a limited tax amnesty program, with $8.5 million already collected with two weeks to go before the program ends.

“So far it has done as we expected,” Jerome Gerard, acting executive director of Maine Revenue Services, said last week. “Perhaps it will outdo what we had projected.”

The program started Sept. 1 and continues through the end of this month. It was projected to yield $9 million and was conceived as part of the state budget to collect some of the more than $250 million in overdue taxes, penalties and interest owed the state by more than 70,000 taxpayers. Maine Revenue Services says that number includes both individuals and businesses that have some tax liability.

The program, the Tax Receivables Reduction Initiative, waives 90 percent of the penalties owed, while requiring all of the tax and interest that is owed to be paid before the end of the program. The plan is aimed at the growing amount of uncollected taxes during a recession, which is making it difficult for businesses and individuals to pay what they owe on time.

“This is not as attractive as the program in 2003,” Gerard said. “The last program we did waived all the penalties and cut the interest by 50 percent.”

That program brought in $37.6 million, well above the $19 million estimate. A similar amnesty in 1990 yielded $29.6 million.

Finance Commissioner Ryan Low said that while he is pleased with the apparent success of the program, it still will leave significant uncollected revenues and that will likely be addressed as part of the supplemental budget that will be needed to bring the budget into balance.

“As we prepare the supplemental budget we will take a look at how the program worked and see if there is a chance to expand it, drill down on those accounts receivable and see if there is more we can do,” he said.

Sen. Joe Perry, D-Bangor, co-chairman of the Legislature’s Taxation Committee, is not happy with the consideration of another amnesty program. He said last week that the current program was a creation of Maine Revenue Services and the Appropriations Committee, with little Tax Committee input.

“If they ask us about doing another one, I will say that we probably shouldn’t do another one so soon,” he said, “but when they say they have to consider everything because things are so bad, I think that is right.”

Sen. Bill Diamond, D-Windham, co-chairman of the Appropriations Committee, said his panel will have to look at everything to close the budget gap. He said some programs will be cut, some eliminated and others merged to meet a growing revenue gap.

“We are not sure how big it is, or will be,” he said. “When you look at that tax money sitting there that is owed, we need to find a way to get more of that collected.”

Low said last week the supplemental budget is being crafted based on a revenue shortfall of $300 million to $400 million.

Diamond acknowledged that even collecting all back taxes that are owed, which no one believes is possible, would not solve the state’s ongoing revenue problem. But, he said, some further collection efforts are likely a part of the solution.

Sen. Richard Rosen, R-Bucksport, said he is pleased the current program is on target, but agreed with Diamond that uncollected taxes are a likely target to help close the budget gap.

“An amnesty program will provide some revenue,” he said. “But it won’t come anywhere near to the budget balancing steps that we will need to take.”

Perry said his panel always has been told by MRS officials that there needed to be a stick as well as a carrot when collecting tax debts. He said the carrot is out there now, and should be followed with a strengthened collection effort that goes after those who did not take advantage of the tax amnesty.

“What I would like to see is an increased effort but also a change in attitude at Maine Revenue Services,” he said. “Maybe it is time we consider an independent taxpayer advocate who maybe can go beyond the scope that is allowed now and maybe negotiate to settle these debts in a way that works.”

Perry said the Tax Committee will certainly discuss the current amnesty program and possible ways to collect more in overdue taxes when the panel next meets.

The current amnesty program does not extend to matters already referred to the attorney general for prosecution nor to matters already in court for collection. It also requires the tax liability to be paid in full by the end of this month.